Crypto investors are eagerly waiting for the potential approval for a spot Bitcoin exchange-traded fund (ETF) in the United States this January. But, today December 29, 2023, marks a crucial deadline set by the U.S. Securities and Exchange Commission (SEC).
SEC mandates S-1 amendments
Last week, the SEC announced that ETF applicants must submit their final S-1 amendments by December 29. Additionally, the regulator also mandated the signing of an agreement with an authorized participant (AP) and the resolution of the cash-create redemption model it prefers. This deadline is poised to reveal which of the 14 applicants could be part of the initial wave of spot BTC ETF approvals, which is expected to be approved in the second week of January 2024.
ETF expert Eric Balchunas, reports that many applicants have recently updated their S-1 filings to incorporate the cash-create redemption model. As of December 22, seven applicants have exclusively adopted the cash-create model, while the remaining seven have included both cash-create and in-kind models in their registration statements.
Applicants adopting the cash-create model
These seven applicants are Ark 21Shares, Bitwise Bitcoin ETF Trust, VanEck Bitcoin Trust, Invesco Galaxy Bitcoin ETF, Valkyrie Bitcoin Fund, Hasdex Bitcoin ETF, and 7RCC spot Bitcoin and Carbon Credit Futures ETF. While the other seven opt for both cash-create and in-kind models.
Source: Eric Balchunas (post on X) SEC’s push for cash model and control systems
Traditionally, most ETFs involve in-kind creation, where intermediaries provide actual assets like Bitcoin to create new ETF shares. However, the SEC is pushing for the cash model for spot Bitcoin ETFs to reduce the number of intermediaries accessing actual Bitcoin during redemption and offering processes.
Balchunas explains that the SEC aims to create a more controlled system with fewer entities handling the physical Bitcoin, expressing concerns about broker-dealers and potential unregistered subsidiaries.
In addition to the cash-create preference, ETF applicants are required to have a designated AP by today’s deadline. Balchunas suggests that while not many agreements have been signed yet, major trading firms Jane Street and Virtu Financial are likely to become the authorized participants for most applicants.
However, some uncertainties remain, as exemplified by ARK and 21Shares not specifying the name of their AP in the most recent spot Bitcoin ETF amendment filed on December 28. Balchunas supposes that such details may be finalized just before the official launch.
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